Participant Notice Requirements For CARES Act Health Plan Changes

***Information and guidance in client updates was up to date at time of publication. During the pandemic, information and guidance has been changing rapidly. If you have any questions about the information contained in a client update, please contact the author(s) or your Miller Johnson attorney.***

Earlier this week we issued a client alert summarizing the health benefit plan provisions in the CARES Act [click here for link].  Many employers have asked us—what are our participant notice requirements with respect to these new provisions?  The CARES Act does not include special participant notification rules.  As a result, we look to the general notice rules under ERISA (for employer plans subject to ERISA) and the ACA.

Overview of Participant Notice Rules

There are three participant notice rules.

• First, the general rule under ERISA is that participants must be notified of health plan changes via a new summary plan description (SPD) or an amendment to the SPD (known as a summary of material modifications or SMM) within 210 days after the end of the plan year when the changes were adopted.
• Second, there is an exception to the above general rule which requires an earlier notice.  This ERISA rule applies in the event the change constitutes a material reduction in covered services or benefits with respect to a group health plan (such as an increase in a deductible, copay or coinsurance, or the elimination of a benefit).  In the event of such a material reduction, participants must be notified within 60 days of the date the change is adopted.
• Third, under the ACA, if an employer makes a health plan change mid-year which affects the information in the summary of benefits and coverage (SBC), the SBC must be reissued to participants at least 60 days before the mid-year change is to take effect.  Interestingly, this requirement potentially applies to both reductions in benefits as well as benefit enhancements.  It does not apply to changes which don’t affect the content of the SBC.

Application of the Rules to the CARES Act Changes

The CARES Act doesn’t call for ANY material reductions in group health benefits.  Rather, the changes are all improvements for participants (e.g., first dollar coverage for COVID-19 testing and the associated health care visit, expanded first dollar ACA preventive care to include certain COVID-19 related services, including immunizations, and a green light for high deductible health plans (HDHPs) to provide free telehealth without jeopardizing a participant’s HSA eligibility).  As a result, the 60 day participant notice rule (the second rule) described above does NOT apply.  SMMs should be prepared but the timing is based on the first rule described above, which should provide employers with ample time.

Do any of these items affect the information in a typical SBC?  While the SBC generally refers to diagnostic tests and health care provider visits (which may include telehealth), it appears these references are only required to be modified for less favorable limitations (rather than a more favorable elimination of cost sharing).  Further, since employer group health plans are generally required to immediately comply with the CARES Act changes, the CARES Act effective date should take precedence over any potential application of the SBC notice rule for mid-year changes.  In other words, updating the SBC before the changes are made isn’t required.  Having said this, employers (and their insurers/third party administrators) should review the current SBC for the plan and consider making any helpful revisions to better inform participants.  The good news is while this should occur ideally in the near future, employers don’t need to act immediately.

Are there Any Other Reasons Why an Employer Should Move Quickly to Notify Participants?

While you may be reading this Client Alert and breathing a sigh of relief that the 60 day SMM rule and SBC mid-year rule don’t apply—that doesn’t mean that there may be other reasons to act fairly quickly.  For example, some of these changes are optional and participants should be made aware as soon as possible if you elect for the enhancements to apply to them.  Optional changes include waiving participant cost-sharing for telehealth visits under an HDHP (for services other than required COVID-19 diagnostic testing), and expanding the list of eligible expenses for medical FSA purposes to include OTC drugs without a prescription and menstrual care products.  Another reason to act soon is to relieve anxiety.  Everyone is anxious and providing reassurance that COVID-19 testing and the related health care visit will be covered at no charge will be very welcome news for your workforce and their families.